On June 22, 2006, at
the 2006 Annual Meeting of Stockholders of SRS Labs, Inc. (the Company),
the Companys stockholders approved the adoption of the SRS Labs, Inc.
2006 Stock Incentive Plan (the Plan), which previously had been approved by
the Companys Board of Directors (Board), subject to such stockholder
approval. The Plan permits grants of stock options, stock appreciation rights (SARs),
restricted stock, restricted stock units, deferred share units and
performance-based awards (collectively, Awards). The Companys Board and/or
Compensation Committee (Committee) has the authority to determine the type of
Award, as well as the amount, terms and conditions of each Award, under the
Plan, subject to the express limitations and other provisions of the Plan. A
summary description of the Plan is set forth in the Companys definitive proxy
statement filed with the Securities and Exchange Commission on April 28,
2006 in connection with the Annual Meeting of Stockholders held on June 22,
2006.

The purpose of the Plan
is to attract, retain and motivate select employees, officers, consultants, and
directors of the Company and its affiliates. The Board approved the Plan
because it believes that the Company needs an updated employee benefit plan to
replace the 1996 SRS Labs, Inc. Long Term Incentive Plan in light of
changes in the accounting rules and tax laws regarding compensation awards.

The Plan provides that no
more than 1,500,000 shares of Common Stock may be issued pursuant to Awards
under the Plan, including stock options and SARs. These shares shall be
authorized but unissued shares, or shares that the Company has reacquired or otherwise
holds in treasury or in a trust. The number of shares available for Awards, as
well as the terms of outstanding Awards, are subject to adjustment as provided
in the Plan for stock splits, stock dividends, recapitalizations and other
similar events. Shares of Common Stock that are subject to any Award that
expires, or is forfeited, cancelled or becomes unexercisable will again be
available for subsequent Awards, except as prohibited by law. In addition,
shares that the Company refrains from delivering pursuant to an Award as
payment of either the exercise price of an Award or applicable withholding and
employment taxes will be available for subsequent Awards. The Plan also
contains certain limits with respect to the terms of different types of Awards
and with respect to the number of shares subject to Awards that can be granted
to a participant during any year.

The Board intends to
register the shares of Common Stock that will become available for issuance
under the Plan on a registration statement on Form S-8 to be filed
with the Securities and Exchange Commission at the Companys expense.

The term of the Plan will
be ten years from June 22, 2006, the date that it was approved by the
Companys stockholders. The Board may from time to time, amend, alter, suspend,
discontinue or terminate the Plan; provided that no amendment, suspension or
termination of the Plan shall materially and adversely affect Awards already
granted unless (i) it relates to an adjustment pursuant to certain
transactions that change the Companys capitalization, (2) it is otherwise mutually agreed
between the participant and the Committee, or (3) the Committee determines
in good faith, before a change in control of the Company, that the modification
is not materially adverse to the participant.

The foregoing description
does not purport to be complete and is qualified in its entirety by reference
to the text of the Plan which is filed as Exhibit 10.1 to this Current
Report on Form 8-K and is incorporated by reference herein.

2. Bonus Payments related to Patent Reward Program

Based upon a Patent
Reward Program of the Company, which is filed as Exhibit 10.2 to this
Current Report on Form 8-K and is incorporated by reference herein,
the following executive officers of the Company will be awarded bonuses for
their efforts relating to the recent issuance of certain patents in the United
States: